First payment on brand new credit card

Uplink

Hi all,

I got my first ever credit card at the beginning of August and I received the statement at the end of August, which states that the payment is due on 25 September. I'm now worried that I may have misunderstood some things.

MSE is full of "pay in full each month to not incur interest" advice, but now I'm not sure what that means: pay the statement in full (i.e. charges incurred after the statement is issued can be left unpaid until the next statement is due), or does it mean pay the entire balance? I don't have the Ts&Cs with me right now, so I can't read the exact wording, and the CC company doesn't have them online apparently.

I already have a DD set up for "full statement balance" which they'll take on or before the due date, but that's just the statement, not the entirety of the balance, thus the question above, as I wonder if I need to top it up via Faster Payments or just wait for the next statement and pay that in full by DD, then keep this up.

The second thing about the "up to 56 days interest free purchases" period. The Internet seems to say that because there are not other previous statements, so I couldn't have paid anything in full, I'm on full interest schedule. Any ideas?

And third: if my balance at statement date is always near the limit (while keeping the covering amount in a savings account), would that affect my credit score in the future? Some US sites say that usage ratios are taken into account, and if you want to improve your score you shouldn't charge more than 30% of your credit limit (or pay early so no more than 30% is reported to credit agencies). But the UK isn't a US state, so...

Cheers

PS. If the above sounds dumb, it's probably because in this particular case I am

newbutold

As long as you pay the statement balance in full each month you will not incurr interest.

Any transactions made after statement date do not need to be paid until they appear on the next months statement - hence how you can get upto 56 days interest free.

Lith

newbutold wrote: »

As long as you pay the statement balance in full each month you will not incurr interest.

Any transactions made after statement date do not need to be paid until they appear on the next months statement - hence how you can get upto 56 days interest free.

Exactly,

if you pay in FULL each month what you've spent n pay it back in full then you don't pay interest or any hidden charges NOTHING AT ALL

(untill you used the card again)

unimaginative_user_name

Does your statement say the full amount will be taken from your bank account on such and such a date? It would be worth checking this just to make sure the DD has been set up properly and check the account your DD is being taken from to make sure everything is in order.

By the way you're not dumb OP! You've done exactly the right thing in setting up the pay in full DD.

[Deleted User]

In answer to your other query, I would try to keep a healthy distance from your credit limit, as it can make you appear stretched. You also have the risk of going over.

nickcc

I have three credit cards and all are set up to pay in full by DD every month, never paid interest on these cards (wish I could say that we're the case a few years ago).

exel1966

Uplink wrote: »

But the UK isn't a US state, so...

We may as well be as we seem to politically toe the line on everything the US says and does ! GB..51st state !!

Pay the statement balance in full, no interest. Anything generated after the statement carries over to the next month.

Pay just 1p short of the statement balance and you'll pay interest on the full amount, not just the 1p.

Uplink

Thanks for the replies. Really appreciated.

Meanwhile, I found my credit agreement (on the back of the letter that came with my CC stuck to it), and the relevant passage says:

No interest is payable if you pay in full the outstanding balance on your first statement by its payment due date. No interest is payable on subsequent statements if the outstanding balances on your current statement and the previous statement are paid in full by their respective payment due dates.

So here's what I learned:

Indeed I am not on interest schedule, as per the first sentence, which is good :T and then it's all good as long as I keep paying the statement balance in full by the due date.

Regarding the "up to 56 days interest free purchases", the proper way to view this is that interest is due on purchases from day one, but they'll waive it if you pay the statement in full, not that you get an "interest free period". Looks like one, but that doesn't make it one (as exel1966 excellently demonstrated with the 1p short example).

Panic mode off then.

As for my third query, it's an interesting interpretation that I might be stretched when I pay it in full every time. My limit is only 200 pounds, so if I use the CC instead of a debit card for shopping, it's easy to get high usage ratios without actually being stretched. But as no one knows the exact formulas for calculating credit scores, I guess it's better to err on the side of caution.

I'm planning to play with my balance until the end of the year - go near the limit, stay away from it, pay it early, that kind of stuff - then get a copy of my credit file to see how everything got reported and adapt accordingly.

Thanks again everyone!

JimmyTheWig

Uplink wrote: »

And third: if my balance at statement date is always near the limit (while keeping the covering amount in a savings account), would that affect my credit score in the future?

Your other questions have been answered perfectly already (i.e. you're doing the right thing, so carry on) but I thought I'd add my thoughts on this...

Firstly, and most importantly, note that your balance is whatever you owe them at any one time. Your statement will show you what you owed them at the statement date, for example. But remember that the payment for that amount will only be taken a few weeks after the statement date. In that time you will be, potentially, spending on the card. So your balance will go higher than it was at the statement date. With a £200 limit you _cannot_ spend £200 a month.

Secondly, yes when companies do a credit check on you they will see how close you are to your limit each month. Being close, in general, may scare them off.

Thirdly, I would imagine that if you don't regularly get fairly close to your limit then your current card provider won't be interested in increasing your limit.

Unless you plan to make a critical credit application (e.g. mortgage) in the near future then I'd say run the card fairly close to the limit for six months then ask for a limit increase.

Uplink

JimmyTheWig wrote: »

Thirdly, I would imagine that if you don't regularly get fairly close to your limit then your current card provider won't be interested in increasing your limit.

Unless you plan to make a critical credit application (e.g. mortgage) in the near future then I'd say run the card fairly close to the limit for six months then ask for a limit increase.

That's very interesting insight. Now... my card doesn't have the option for a limit change. It's the CapitalOne Secured Credit Card (49 pound security, 200 pound credit limit - can't be neither higher or lower), so I'd need to apply for a different card later at some point. Should I do the same thing if I'll be applying for another CapitalOne product in the future, after I've got some history with them, or would that scare them as well? They'd probably give me a limit based on my income then, if accepted.

JimmyTheWig

Hard to tell, Uplink.
The most important thing is to not exceed your limit.
As long as you do this, and everything else is ok, I don't see you being refused a different basic card in the future.